Bitcoin is still looking bearish in the short term but saw a small rally after details from Wednesday’s Federal Open Market Committee meeting were released. Investors get cagey when the Fed starts commenting, and understandably so considering their pontification sometimes directly reflects in the market. However, signs from hearings over the last few weeks point in a positive direction for digital assets.
It was the announcement of several rate hikes and a slowing down of bond purchasing proposed by the Fed for 2022 that gave both Bitcoin and Ethereum a slight boost amidst a longer-tail downtrend. This new dip shouldn’t be anything to sweat over though, with the pattern showing similarities to September’s bear market that proved to just be a ramp to continued bullish territory. While the overall dip may be garnering some attention, the government focus lies mainly on Bitcoin’s much less volatile counterparts—stablecoins. (Cointelegraph)
It’s no surprise that the government is freaking out a little over stablecoins, because they hit the closest to home. Bitcoin has always seemed a world apart (although not for long) from mainstream transactional money. As non-volatile assets that stand to disrupt the current financial system, stablecoins leave government officials both overtly cautious about the impending threat of change and overwhelmed by the power they could harness with this new technology.
The house held a hearing this Tuesday, titled “Stablecoins: How do They Work, How Are They Used, and What Are Their Risks?” The discussion brought forth many voices, both for and against the adoption of stablecoins as a mainstream economic solution.
Senator Elizabeth Warren of Massachusetts continues to push against the crypto wave, citing her ample concerns about the effect of stablecoins on the American economy. Warren’s most recent fear centers around the connections between Decentralized Finance networks and stabilized currencies, stating that stablecoins are “propping up one of the shadiest parts of the crypto world, DeFi, where consumers are least protected from getting scammed.”
Senator Sherrod Brown of Ohio took Warren’s argument a step further, calling crypto “magic money” and labeling stablecoins as a foundation for a “new fantasy economy.” These arguments lean heavily on the concept of consumer protection but may lack some of the technical insight needed to understand the way the decentralized market works. One of Warren’s arguments was framed around taking a loss on stablecoins because they have to go through an exchange, with rates that fluctuate. That being said, when there’s no other regulated place for these assets to live for mainstream access, it would seem that the ball is in the government’s court to solve that problem. (Cryptopotato)
Representative Patrick McHenry of North Carolina, who was present at last week’s House Financial Services Committee hearing, said on Twitter, “Congress must work to fully understand and embrace these innovative new technologies, like #crypto. We don’t need knee-jerk reactions by lawmakers to regulate out of fear of the unknown.” (Twitter)
McHenry may have articulated it best when he made a candid request of his peers to be thoughtful in their communications on these topics. “This technology is already regulated. Now, the regulations may be clunky, they may not be up to date. I ask my friends, my policymaker friends here on the Hill, this question: Do you know enough about this technology to have a serious debate?” (Cointelegraph)
And the citizens are getting restless. These opposing voices are overshadowed by the six or more senators that are backing stablecoin adoption with the intent of democratization and equality. Dante Disparte, CSO and Head of Global Policy at Circle, spoke at this week’s hearing as a voice for innovation in the space, hinting that a regulatory framework could be the key to empowerment.
“I argue that we are winning [the digital currency] race because of the sum of free-market activity taking place inside the U.S. regulatory perimeter with digital currencies and blockchain-based financial services,” said Disparte. “The sum of these activities are advancing broad U.S. economic competitiveness and national security interests.” (Cointelegraph)
The keyword there is “free,” with one of the main goals behind the use of stablecoins, and crypto as a whole, being more financial equality and freedom. The issue for the government, as always, comes down to control. This is where initiatives like Web3 come in, what McHenry referred to at the hearing as “the next generation of the internet.” Web3 aims to decentralize the internet, the most pervasive and influential forum of the modern world, and it stands to have the same level of influence as the forum we know today.
Consider the massive equalizing factor that the internet has provided over the last three decades. Ease of access to education, commerce, global communication, the arts—all of these things and more became available to all as the internet grew. Over time, large enterprises wielded this access as a tool for gain. Web3 creates an open internet that will use artificial intelligence to bring users the most unbiased data possible. (CoinMarketCap)
However, similarly to the way the internet we know came into existence, the advent of Web3 creates a restlessness amongst legislators that is unique to the fear of the unknown. The usefulness and necessity of this new frontier is too important to be ignored and urgent in its need for understanding and implementation. McHenry implored the Senate to remember the early 1990s and act with the knowledge of experience when looking at this new movement.
“Congress should not be dumb enough to raise a red flag around this technology revolution,” argued McHenry. “We should embrace it, we should understand it, and we should be the international leaders in this space…when an invention called ‘the internet’ began to boom, U.S. lawmakers and regulators struggled to fully grasp the immense possibilities of this innovation…I think we’re in a similar state with Web3. I would argue that the nascent technology we are discussing today would have just as much impact on our daily lives.” (Twitter)
The world now presents legislators with reasonable and feasible solutions for bringing digital assets to the current economic infrastructure. It’s been months, and regulative decisions are slow going. In an economy rattled by inflation and ravaged by the pandemic, people are demanding change. The future is knocking on the door of Congress, and the recent hearings show evidence of growing curiosity and a thirst for knowledge. Through ongoing hearings and what appears to be an overwhelming amount of positive arguments toward the freedom of decentralization, it feels certain that they will let the future in.
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